Easy online access to auto pricing information means consumers in the market for a new car are arriving at the dealership better informed than ever. For dealers, catering to savvy shoppers can boost the bottom line: The sales process can be faster, simpler and leave customers more satisfied when they drive off the lot—and more likely to return.
Buyers are often willing to pay more for the right vehicle, says Jonathan Banks, senior director of editorial and data services at the National Automobile Dealers Association (NADA). “The dealers that are doing well are embracing [this customer willingness],” Banks says, “They’ve been able to maintain a solid profit margin.”
Understand consumers and their resources
Pricing transparency creates an opportunity for dealers to align their prices with what the customer expects. As a result, much of the pricing deviation and range in the auto market has contracted.
According to NADA, the listing price range of comparable used vehicles with similar mileage has decreased by two percentage points to 8 percent since 2008. In addition, the difference in average price paid for a vehicle at auction versus its listing price has decreased by $1,000 since 2008, from approximately $5,000 to $4,000.
“What we’re going to see is more transparency in the listing price,” Banks says. Eventually, the industry may reach a point where price negotiation ends altogether, as consumers arrive at dealerships with price expectations firmly set.
With more consumers conducting research online, they’re deciding not only how much to spend, but what to buy. Transparency around the price points and models consumers desire is a benefit to dealers, who can purchase their inventory to match, Banks says.
Focus on customer satisfaction
Seventy-nine percent of new vehicle buyers conduct research online before ever visiting a dealership, according to the J.D. Power 2013 New Autoshopper Study. The uptick in informed consumers has shifted the focus of the sales conversation from price negotiation to customer experience.
According to a DMEautomotive study, 68 percent of customers visit only two dealerships or fewer before purchasing their vehicles. The decline in shopping around means dealers have to capitalize on that first moment a customer walks in the door. The consumer enters ready to buy, and that first meeting is vital to obtaining that customer’s business. “[Dealers] know if they get a knowledgeable consumer they have a real likelihood of closing,” Banks says.
As cars become more advanced, there are fewer do-it-yourselfers, and customers are expecting dealerships to provide maintenance, repairs and parts. “That’s a big component of where dealers are today as far as making their profit,” says Stu Zalud, director of dealer services at NADA. The customer experience is vital to turning a buyer into a returning customer.
Cater to millennials
As the population ages, millennials will account for the largest market segment of buyers. Unlike previous generations, millennials don’t like to negotiate, Zalud says. They know what they want, and they want to purchase it on the spot. “Dealers need to conform to the way that person wants to do business,” Zalud says.
According to the Polk 2013 Automotive Buyer Influence Study, the average vehicle shopper spends between 10 and 12 hours online shopping, and just under four hours shopping at a dealership.
Price transparency makes the purchasing process more streamlined than it used to be, Zalud says. “With less negotiation on both sides it improves the speed of the process.”
Tailor your sales training
With customer service at a premium, compensation at dealerships is becoming more closely tied to customer satisfaction rather than sales, Banks says.
“Salary is on the rise as opposed to the commissioned base,” Zalud says. Tying salaries to the customer experience leads to better training for employees and happier customers as a result.
Some dealerships have moved toward a streamlined sales method where each salesperson has the training and expertise to carry the customer from the beginning of the sale to the end. Others employ product experts who can share detailed information about each make and model, and then rely on a sales force to handle the actual purchase.